COLUMBUS, OH--(Marketwire - February 26, 2009) - SCI Engineered Materials, Inc. (
OTCBB:
SCIA),
a manufacturer of ceramics and metals for advanced applications in the
physical vapor deposition industry, today reported income applicable to
common shares of $88,787, or $0.02 per diluted share, for the fourth
quarter 2008 compared to $120,976, or $0.03 per diluted share, for the same
period in 2007.
For the twelve months ended December 31, 2008, income applicable to common
shares was $100,177, or $0.02 per diluted share, versus $307,682, or $0.07
per diluted share, in year 2007. The year 2008 results reflected increased
investment in SCI to position the Company for future growth, which also
included approximately $500,000 in production equipment.
Dan Rooney, Chairman, President and Chief Executive Officer, stated, "2008
marked the third consecutive year of profitable results for SCI. Going
forward, we are pleased with the anticipated growth in our markets,
particularly Thin Film Solar, and are aggressively implementing plans to
address those opportunities. During the past year we continued to make
substantial investments in our business. Recently, we improved SCI's
financial flexibility through a $1 million business loan agreement with a
regional bank that reflects the Company's improved performance. We
anticipate using these funds primarily for working capital as we continue
implementing our growth strategy during a period of unprecedented
challenges in the global financial markets."
Mr. Rooney added, "Following a slow start in the first half of the year we
ended 2008 with solid performance, particularly in the midst of
fast-changing conditions in the global economy. We improved gross profit
7% year-over-year through improved product mix despite a decline in total
revenues compared to 2007. Additionally, we realized further progress in
several of our markets during 2008 with particular gains realized in Thin
Film Solar due to SCI's growing product line coupled with increased
marketing and sales activities in major markets within Asia, North America
and Europe. These efforts also benefited from our participation in
additional trade shows specifically focused on our key markets. Trial and
qualification orders were shipped to customers in the semiconductor and
solar industries during 2008 and further progress is anticipated in 2009."
2008 Financial Results
Total Revenue
Total revenue was similar for the fourth quarter 2008 and fourth quarter
2007 at $2,379,807 and $2,384,993, respectively. Key factors in both
periods included higher sales to Photonics customers, which includes Thin
Film Solar. Due to the lower cost of a high priced raw material total
revenue declined 11% to $9,619,895 for the year 2008 compared to
$10,832,682 for the year 2007. Excluding the revenue associated with the
high price raw material, total revenue increased 29% for the fourth quarter
2008 and increased 21% for the year 2008 compared to the same periods in
2007.
Total orders for the year 2008 increased 13% to $11.7 million from $10.4
million in 2007. Backlog increased to $2.9 million at December 31, 2008
versus $1.0 million on the same date a year ago.
Gross Profit
Gross profit declined approximately 4% to $575,039 for the fourth quarter
2008 from $596,442 for the same period in 2007. However, for the year
2008, gross profit increased 7% to $2,211,477 from $2,057,823 in 2007
notwithstanding an 11% decline in total revenue. Due to the Company's
improved product mix, gross profit margin increased four percentage points
to 23.0% of total revenue for the year 2008 compared to the prior year.
General and Administrative Expense
General and administrative expense was similar for the fourth quarter 2008
and fourth quarter 2007 at $215,417 and $215,348, respectively. General
and administrative expense increased 9% to $966,979 for the year 2008
compared to $884,771 in 2007, that was principally attributable to an
increase in staff and professional fees.
Research and Development
Research and development expense declined 14% to $98,639 for the fourth
quarter 2008 from $114,991 for the same period last year, primarily due to
completion of a grant earlier in 2008. For the year 2008, research and
development expense increased 23% to $454,424 from $368,971 in 2007. This
increase was due to additional staff and expense associated with ongoing
product development activities and research related to grants from the
Department of Energy (DOE).
Throughout the Company's history it has conducted funded research primarily
under grants from entities such as the DOE, the National Science
Foundation, NASA, and the Ohio Department of Development. These activities
are generally limited to funded research consistent with our focus on
commercial applications in our principal markets.
The Company was awarded a $708,715 grant from the Ohio Department of
Development during December 2008, pursuant to the Advanced Energy Grant
from the Ohio Third Frontier awards. This award was specifically granted
for the commercialization of rotatable ceramic sputtering targets for thin
film photovoltaic solar cell manufacturing. SCI will commercialize
technologies for the production of transparent conductive oxide coated
glass used in thin film photovoltaic solar panels. These targets can be
used in production processes involving various substrates, including glass,
stainless steel, or plastic, which makes them well-suited for second
generation thin film and third generation dye cells. By optimizing the
composition of the coating utilizing these targets will allow manufacturers
to improve the efficiency of their photovoltaic modules. SCI has supplied
materials to the Thin Film Solar industry for more than 10 years during the
industry's early stages of development.
The Company was awarded a two-year contract in August 2008 by the DOE for
Phase II of a Small Business Innovation Research grant. As disclosed at
that time, the final amount of the award was subject to the completion of
financial negotiations with the DOE. In February 2009, the amount of the
award was determined to be approximately $750,000.
Marketing and Sales Expense
SCI significantly increased its commitment to marketing and sales
throughout 2008. These initiatives were principally focused on the rapidly
expanding Thin Film Solar market and also included the Company's increased
presence at trade shows in North America and Europe for the Photonics,
Semiconductor and Solar markets. Marketing and sales expense increased
approximately 16% for the fourth quarter 2008 to $145,646 from $125,986 for
the same period last year. In addition to staffing and trade show
initiatives, the Company added an exclusive manufacturer's representative
for Europe in the fourth quarter 2008 which is expected to benefit sales of
Thin Film Solar products in future periods. For the year 2008, marketing
and sales expense increased 28% to $587,202 from $457,689 the prior year.
EBITDA
Earnings before interest, income taxes, depreciation and amortization
(EBITDA) was $197,987 for the fourth quarter 2008 compared to $201,703 for
the same period last year. For the year 2008, EBITDA declined to $552,882
from $615,055 for the year 2007. Adjusted EBITDA, including stock-based
compensation expense, increased to $229,462 for the fourth quarter 2008
from $216,016 a year ago and was $630,230 for the year 2008 versus $672,306
in 2007.
Net Interest Expense
Net interest expense was $18,749 for the fourth quarter 2008 compared to
$7,476 for the same period in 2007. For the year 2008, net interest
expense increased to $78,492 from $15,188 a year ago. The increases for
both periods in 2008 compared to the prior year were attributable to
production equipment acquired through capital lease obligations to increase
the Company's production capacity including new product lines.
Income Applicable to Common Shares
Income applicable to common shares was $88,787, or $0.02 per diluted share,
for the fourth quarter 2008 versus $120,976, or $0.03 per diluted share,
for the same period in 2007, due to slightly lower gross profit and higher
interest expense, net.
For the year 2008, income applicable to common shares was $100,177, or
$0.02 per diluted share, compared to net income of $307,682, or $0.07 per
diluted share, a year ago. The year-over-year difference is attributable
to investments in the business. These included a $129,513 increase in
marketing and sales expense, an $85,453 increase in research and
development expense, and an $82,208 increase in general and administrative
expense. The additional production equipment contributed to an $82,000
increase in depreciation expense, and a $63,000 increase in interest
expense, net, which was partially offset by a $153,654 increase in gross
profit for the year 2008 compared to the year 2007.
About SCI Engineered Materials, Inc.
SCI Engineered Materials, Inc. manufactures ceramics and metals for
advanced applications such as photonics, thin film solar, thin film
batteries, and semiconductors. SCI Engineered Materials is a global
materials supplier with clients in more than 40 countries. Additional
information is available at
http://www.sciengineeredmaterials.com.
This press release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby. Those
statements include, but are not limited to, all statements regarding
intent, beliefs, expectations, projections, forecasts, and plans of the
Company and its management, and specifically include statements concerning
the anticipated growth in SCI's markets, continued implementation of SCI's
growth strategy, and the anticipation of further progress in the
semiconductor and solar industries in 2009. These forward-looking
statements involve numerous risks and uncertainties, including, without
limitation, other risks and uncertainties detailed from time to time in the
Company's Securities and Exchange Commission filings, including the
Company's Annual Report on Form 10-KSB for the year ended December 31,
2007. One or more of these factors have affected, and could in the future
affect, the Company's projections. Therefore, there can be no assurances
that the forward-looking statements included in this press release will
prove to be accurate. In light of the significant uncertainties in the
forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company, or
any other persons, that the objectives and plans of the company will be
achieved. All forward-looking statements made in this press release are
based on information presently available to the management of the Company.
The Company assumes no obligation to update any forward-looking statements.
SCI ENGINEERED MATERIALS, INC.
Reconciliation of GAAP to Non-GAAP Measures
(unaudited)
Three months Three months
ended ended Year ended Year ended
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
------------ ------------ ------------ ------------
Income applicable to
common shares $ 88,787 $ 120,976 $ 100,177 $ 307,682
Interest expense, net 18,749 7,476 78,492 15,188
Income tax expense - - - -
Depreciation and
amortization 90,451 73,251 374,213 292,185
------------ ------------ ------------ ------------
EBITDA 197,987 201,703 552,882 615,055
Stock-based
compensation expense 31,475 14,313 77,348 57,251
------------ ------------ ------------ ------------
Adjusted EBITDA $ 229,462 $ 216,016 $ 630,230 $ 672,306
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Contact Information: For Additional Information Contact:
Robert Lentz
(614) 876-2000